EXAMPLE*****

Example: A firm neglected to record a payment to a supplier of $10,000 for previously recorded accounts payable. If this mistake was corrected, the effects on the following accounts would be: Current Assets (-) 10,000 Long-term assets NE Current Liabilities (-) 10,000 Long-term liabilities NE Common Stock NE Retained Earnings NE Net Income NE a) The Company paid amounts totaling $122,000 to consultants throughout 2006 for an advertising campaign developed during the year. It is the Company's policy to expense the costs of all advertisements as of the first date the advertisements take place. The Company launched the campaign on December 31, 2006. The accountant mistakenly capitalized all advertising costs in its balance sheet. If this mistake is corrected, that is, if the amount is correctly recorded as an expense, what would be the correct amounts for the following? 1 Gross profit ? Selling, general and administrative expenses? Current assets? Retained earnings? Cash